FEMA > FDI > Conversion of royalty, lumpsum payment or ECB or pre-incorporation expenses or for import of new or second hand machinery or equipment or goods into Equity or convertible equity capital of the company
The Company law compliances remain as the basic compliances which are applicable for public listed companies as well as unliste
FEMA > FDI > Conversion of royalty, lumpsum payment or ECB or pre-incorporation expenses or for import of new or second hand machinery or equipment or goods into Equity or convertible equity capital of the company
The Company law compliances remain as the basic compliances which are applicable for public listed companies as well as unlisted entities which is either a public or private limited company. While issuing equity shares or any other instrument convertible into equity shares the basic company law compliance shall be complied with.
There are different methods in which shares can be purchased such as non-cash consideration method or settlement or payment method. The transaction falls under non-cash consideration method when royalty or lumpsum payment is processed or when technology is transferred or when a loan is given to the Indian company or when the promoter bears expenses for formation of the company. Similarly instead of cash payment to supplier of machinery or goods, shares can be given to such supplier. All such transactions are permitted subject to minimum restrictions, like processing of necessary approvals with respect to the members of the company, valuation guidelines and tax clearance, if any.
Thus, shares can be issued by Indian company to the foreigner in lieu of consideration which is not in the nature of cash, provided all the other transactions have taken place in foreign exchange and through normal banking channels.
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